By Yelena Barychev and Jane Storero Apr 26, 2021 With large institutional investors, proxy advisory firms, regulators, consumers and other company stakeholders focused on environmental, social and governance metrics in evaluating a company, the board’s oversight of ESG risks and opportunities is no longer optional. The rise of stakeholder capitalism, coupled with the Covid-19 pandemic and social justice issues, have significantly increased focus on ESG matters. The Securities and Exchange Commission even increased its bandwidth, creating a new Senior Policy Advisor for Climate and ESG position, as well as a new Climate and ESG Task Force in the SEC Division of Enforcement. Acting SEC Chair Allison Herren Lee directed her staff to evaluate disclosure rules to facilitate “consistent, comparable, and reliable information on climate change” and to create an effective ESG disclosure system. These developments signal that boards can no longer take a “wait and see” approach with respect to ESG and should start addressing matters proactively. Given the growing body of evidence that ESG makes good business sense and the anticipation that the SEC rule making in this area is on the horizon, companies should integrate ESG initiatives into their operations. To be effective, companies need to identify ESG risks and opportunities, include ESG initiatives in long-term strategic planning, enterprise risk management efforts and culture, and link executive compensation to ESG goals. The evaluation of what initiatives to incorporate in the strategic plan requires careful consideration and the integration of ESG risks into the company’s risk management system has the effect of placing these risks in the purview of the board’s oversight. Clearly communicating the company’s ESG strategy and metrics to investors and other stakeholders is critical. Many companies have issued annual ESG or sustainability reports. Given the increased focus, more frequent updates may be necessary and companies must determine whether to report such updates on their key ESG initiatives. Public reporting of ESG metrics in standalone reports or on the company’s website requires this information be accurate, complete and consistent. It should be reviewed with the same rigor as financial information included in SEC reports. The success of a company’s ESG initiatives requires the board or board committee to exercise oversight over management’s implementation of the ESG strategy across the company and its integration into the company’s culture. A company’s board needs to proactively engage with management on such issues. With any companywide initiative, it is important that the board sets the tone. Simply put, boards need to get on board with ESG now. Yelena Barychev is Partner at Blank Rome LLP and Co-Lead of Blank Rome’s ESG team. Yelena has represented a wide range of companies in connection with capital markets and corporate governance matters. Yelena also serves as President of the Association of Audit Committee Members, Inc., and is a member of the board of directors of The Forum of Executive Women. Jane Storero is the Senior Corporate Governance Counsel at LTSE Services. Jane combines her years of experience as a securities partner in a large law firm and in house experience as corporate secretary for a Fortune 500 company to advise companies on corporate governance, ESG and other related matters. Jane is a member of The Forum of Executive Women.